Guide to Buying a Second orVacation property in Puerto Rico!

www.palmasmls.com Elder Realty Puerto Rico 787-207-4255

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5 steps to buying a rental property or weekend getaway

Evaluate your lifestyle and needs before buying a vacation or rental home.

One out of three homes sold in 2009 was a vacation home or investment property, showing that demand for second

homes remains healthy despite a slow housing market. Reasons for buying a second home vary, from recreation and va-

cation enjoyment to investment and development to retirement planning.

With homebuyers enjoying an advantage in many markets, now may be the time to buy that second home. Whether

you're dreaming of paradise like “Palmas del Mar” or profit, follow these five steps for a smart investment:


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SECOND HOME FACTOIDS:

Median age of buyer: 46 (baby boomers own 57 percent of all second homes)

Median household income: $99,100

Median price of second home/nonprimary residence: $211,000

No. 1 reason for buying: Family retrea

No. 2 reason: Future primary residence

No. 1 location to buy: The South

No. 2 location: The West

Most popular type: detached single-family homes, followed by

townhomes and condominiums

Most popular area: suburbs, followed by small towns, urban areas,

resort and vacation areas like Palmas del Mar, Puerto Rico

www.palmasmls.com

Source: National Association of Realtors

Think through your plans for a second property before you leap advice experts.

Assess your goals. It may come down to investment reasons, vacation enjoyment or a combination of both.

Want a place within driving distance for a retreat? Looking for a family vacation spot? A jump on a retirement

home? Read the bylaws before signing a purchase contract and agreement, and make sure they allow you to

rent the unit in short term rentals.

Consider the market conditions, your personal finances and the affordability of the property. Given the

downturn in housing prices with many U.S. regions taking hits, there are deals to be had, says Elder Lopez,

from www.palmasmls.com a real estate broker in Puerto Rico, specializing in second and luxury homes. "Use

the right agent in the right city and if you do your homework, you can find some phenomenal buys if guided with

Elder Realty. Don't plan to flip or sell the property within the next 12 to 24 months."

Focus on areas with steady appreciation rates. Don't bank on renting out the home or having all your ex-

penses covered, advises Elder Lopez, from Elder Realty at Palmas del Mar Resort www.palmasmls.com . "Do

look at a second home as an investment and consider areas where homes are going to appreciate." Palmas

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del Mar has great deal in short sales, foreclosures and discounted new developments plus all the current local

government incentives like:

Palmas del Mar Resort with its new renovated country club offer the best at low price, visit

www.palmaspac.com for more details.

Once you have a good idea of your goals around a second home, it comes down to homework and scouting for the right

property in the right location.

Try it out first.

When assessing location, particularly for a vacation home in an area you're not familiar with, renting for at least

one stay is always a good first step. Carefully consider travel time and expenses against how often you plan to

use the home, real estate broker Elder Lopez says. "How accessible is the property? With the price of gas to-

day and rising airfares, this is a big issue."

Talk to the locals.

Even if you've been vacationing in the same area for years, getting to know the place from a local perspective

is important before buying a home there. Talk to residents and ask them what they like about the area, how it's

changing, what types of people are moving there and what it's like off-season.

Act like a local.

You should also visit the area yourself during each season to get a feel for what it's like year round. While

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you're there, scope out restaurants, grocery stores and entertainment. Does the area have enough of the

things you like to keep you interested? Also check out the school system www.palmasacademy.org ; even if

you never plan on your kids attending there, homes near great schools have more value.

Look at the comps.

To help gauge whether the property is a good investment, review other home sales in the community to exam-

ine what the track record is on resale values of similar properties, Elder says.

Know the rules of renting.

If you plan to rent the property, expect to do additional research. For example, some communities ban weekly

vacation rentals, allowing only for monthly rentals. "It depends on the homeowners association and the law,"

Elder says. On the flip side, if you're craving a quiet retreat, you may not want to vacation in a community with

a lot of rental turnover.

Work with an experienced agent like Elder Realty at www.palmasmls.com

A seasoned real estate agent can help you weigh your criteria and make all the difference in a second home

purchase. Try these tips for finding an agent or broker:

Find an agent that knows the area and property values. "Select one with at least five years minimum

experience in that marketplace, preferably more," Elder says.

For extensive searches, scouting in resort communities like Palmas del Mar or exploring alternatives,

like Google search engines, consider an agent with the Resort & Second Home Property Specialist

like Elder Realty who lives and operate inside Palmas del Mar Resort.

Beyond the sale, a good agent will stay in contact and help you. This is particularly important for

homeowners who may not live near the property.

In many ways, second home purchases are similar to the primary home purchase. Elder Realty says putting 20 percent

down or more is common for second homes to avoid the expense of mortgage insurance and given today's tightened

lending practices. "It's possible to buy a true second home with 5 or 10 percent down, but it's tricky," says Elder Lopez

(Resort & Second Home Property Specialist), from Elder Realty at www.palmasmls.com When it comes to negotiating,

second home sellers may be more flexible than their primary-home counterparts. "Second home sellers are often more

flexible in price and terms of sale. They may want out because they are overextended or their lifestyle has changed," El-

der says.

To move the sale along, buyers can request special terms of the seller. For example, as an incentive, sellers might be

willing to carry a short sale where buyer will paid less what the payoff of the seller is. Elder says.

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Consider these tips when investigating your financing options:

For mortgage financing, use a local lender in the area you are buying, avoid, mortgage broker, Elder says, be-

cause its expertise and knowledge of the market can avoid problems later;

Stricter guidelines are involved in qualifying for a mort-

gage for an investment property. Typically, borrowers pay a

higher interest rate; but avoid paying discount points or origina-

tion fees, also never accept prepayment penalty fees, and pick

your own insurance company not the one recommended by

lender. What out for predatory lending. Make sure they comply

with federal laws.

If you do need the rental income to qualify for the loan,

you may need a minimum of 25 percent down, Elder says.

Lenders tend to give credit for up to a 75 percent occupied rate;

Other forms of financing include tapping into your pri-

mary home's equity line of credit, known as HELOCs. This way

you avoid the financing in Puerto Rico and it is cheaper be-

cause the closing costs and in most cases they can be a write

off from income taxes in the states. (consult with your account-

ant first)

Savvy tax planning can make a difference in your return on the property. Tax implications for second homes can vary sig-

nificantly based on your financial situation and whether or not you plan to rent out the property.

Keep these in mind when figuring the impact on your taxes:

Consider property taxes, utilities, homeowners association and regin fees and other applicable expenses. Pal-

mas del Mar for example have two HOAs in most cases, Palmas del Mar Home Onwers Association in Gen-

eral and then each subdivision have its own HOA fees too.


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Generally, the interest on the mortgage of your second home is tax deductible, and rental properties are sub-

ject to additional tax breaks. "If it's an investment property, then the deductions come in an array of possibili-

ties, including depreciation of the real estate itself and a separate, accelerated depreciation of personal proper-

ty such as furnishings," Elder says. "Owners can use the property only for two weeks a year to get certain tax

benefits on rentals,”

If you rent out the home for 15 days or more during the year, you have to report all rental receipts to the IRS as

income or to Hacienda, but you can also deduct operating expenses such as utilities, repairs, insurance and

management fees against that income.

Always consult with a tax professional or a specialist such as a national qualified intermediary for tax-deferred

exchanges before getting too far into the second-home buying process.

Remember that if you purchase a new property before June 30th 2011 the government of Puerto Rico will

waved the Capital Gain Tax, Rental Income tax, Property Taxes in the next five years etc.

In addition to single-family homes, townhomes and traditional condominiums, experts say to tread cautiously with alterna-

tive ownership forms of vacation homes such as fractional ownership, vacation clubs, time shares and condo hotels.

Whether you're looking for a home to spend your retirement days or an investment property to diversify your portfolio,

make sure you do your homework and work with the right experts like Elder Lopez from www.palmasmls.com

For All your Investment opportunities call Elder at 787-207-4255

Limit of Liability/Disclaimer of Warranty: The information and opinions expressed herein are presented with the understanding that they do not represent any or all of the opinions of Elder

Lopez or www.Palmasmls.com member making this publication available to you. The information contained herein is not intended to be a comprehensive discussion of the strategies or

concepts mentioned. Nor is any information or data discussed intended as tax, investment or legal advice. In pursuing any concept or idea presented, you should rely on your own due dili-

gence and on your own attorneys, accountants and other professionals to determine if such ideas or concepts are appropriate for you. Although information herein has been obtained from

sources believed to be reliable, Elder Lopez and www.palmasmls.com , and its local member do not guarantee its accuracy or completeness and accept no liability for any direct or consequen-

tial losses arising from its use. Elder Lopez and www.Palmasmls.com and its local member assumes no responsibility for any errors, omission or damages arising from use of information

contained herein


Guide to Buying a Second orVacation property in Puerto Rico!

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